- Seasonality: Cyclical Patterns in the Crypto Market
- Macroeconomic Factors: Global Economic Influence
- Crypto-Specific Factors: Increased Liquidity and Prospects
In the fourth quarter of this year, popular crypto analyst Miles Deutscher outlined 10 reasons why this period could become a catalyst for significant growth in the cryptocurrency market. In a lengthy thread covering three main areas: seasonality, macroeconomic factors, and crypto-specific factors, Deutscher highlights key points that could substantially alter the direction of the crypto market.
Seasonality: Cyclical Patterns in the Crypto Market
Deutscher began by discussing seasonality or cyclical patterns of the market. He emphasized that despite seemingly random market movements, there is strong evidence that markets, especially cryptocurrencies, are highly cyclical and respond to certain periods in the calendar year.
Historical data show that the Q4 is the strongest period for the S&P 500, with an average price increase of 3.8% since 1945 and achieving a 77% rise over time. For Bitcoin (BTC), Q4 has also been the most profitable period. During this quarter, BTC has registered an average return of 88.84%. In the past two years coinciding with Bitcoin halvings (2016 and 2020), BTC has risen by 58.17% and 168.02%, respectively.
On the other hand, Q3 is the worst period for BTC. Deutscher also reminded that the period from October to April has historically been a boom time for cryptocurrencies, where BTC tends to see significant gains. Data show that the average return of BTC from May to September is 619.5%, while from October to April, it jumps to 13,656.203%. This indicates an accumulation phase from May to September and a bull run phase from October to April.
Macroeconomic Factors: Global Economic Influence
Cryptocurrencies do not operate in a vacuum. Numerous macroeconomic factors are poised to impact the market drastically in Q4. Some of these include elections, inflation, and monetary policy. Deutscher noted that the forthcoming US presidential election plays a crucial role in shaping the market. A win for Donald Trump could be more favorable for cryptocurrencies, especially with his strong support for Bitcoin.
Meanwhile, if Kamala Harris wins, it may not be a death blow to crypto, but potential growth could be limited, and regulation could become a future challenge. He also pointed out the decline in inflation, with the latest consumer price index (CPI) showing the lowest levels since February 2021. Federal Reserve Chairman Jerome Powell has stated that inflation is starting to be controlled, and a rate cut is likely in the coming days.
Data show that rate cuts during non-recession periods tend to be bullish for the market. Furthermore, rate cuts are also likely to weaken the US dollar index (DXY), which, in turn, is beneficial for risk assets like stocks and BTC. Globally, liquidity is starting to increase and is expected to continue growing until 2025. This is good news for Bitcoin, which is highly correlated with global liquidity.
Crypto-Specific Factors: Increased Liquidity and Prospects
In the final part of his thread, Deutscher identified several specific factors that will directly affect the cryptocurrency market. One of the main factors is increasing global liquidity, which has the strongest correlation with Bitcoin prices, more than gold or equities.
Deutscher also mentioned developments with FTX, which will return about $16 billion to its creditors. This is the opposite situation compared to the Mt. Gox sale, which caused a big market drop. The return of FTX funds, mostly to be paid in cash, is expected to inject significant capital back into the market, with many users likely to allocate these funds into crypto assets. Deutscher also noted that retail interest in cryptocurrencies is currently at very low levels. Metrics such as Google trends, social engagement, YouTube views, and others show that 90% of retail interest has waned.
Apps like Coinbase, which used to be in the top 50 most downloaded apps in the US during market peaks, have now fallen beyond 500th place. Nevertheless, this creates significant opportunities for the market to grow again, especially as the market is in an oversold condition and may transition to large buy-ins leading to a bull run.
Q4, according to Miles Deutscher, could be a key period for growth in the cryptocurrency market due to various seasonal, macroeconomic, and specific crypto factors. Closely monitoring these aspects will help investors to timely react to market changes and maximize growth opportunities.
